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Proposed Provincial Check-off Increase

Growing market share for Ontario beef at home and abroad

Together, the Board of Directors of the Beef Farmers of Ontario (BFO) and the Board of Directors of the Ontario Cattle Feeders Association (OCFA) plan to combine marketing efforts into one joint marketing committee, which will be keenly focused on increasing the market penetration of Ontario-branded beef products, both here at home and abroad.

Jim Clark has agreed to manage this marketing committee and assumes the role of CEO of Ontario beef marketing, in addition to his ongoing role as Executive Director of OCFA.

The committee will provide overarching support and promotion for all Ontario beef brands in regional, domestic and international markets by working with our farmers and partners in the processing, retail and foodservice sectors.

By combining the marketing efforts and budgets of both organizations we will unite strengths and avoid duplication of costs, making best use of producers’ funds, while ensuring sharper focus and better results for Ontario’s beef farmers.

To bring to life these efforts, the two organizations are requesting a provincial increase in check-off of $1.50 per head which, combined with existing check-off, would make a total Ontario beef check-off of $5.50 per transaction.

Of the new $1.50, $1.25 will fund the joint marketing committee and $0.25 will be directed to BFO to support consumer and producer engagement efforts.

Q. An increase in check-off from $4.00 to $5.50 seems like a big jump.

The board appreciates that this is a significant request. The main components of the new spending are the joint marketing committee, consumer engagement, and producer engagement. These activities, to be effective, need to be carried out on a larger scale than we have the current resources to cover.

Q. Can BFO decrease its operating costs, but still establish this new joint marketing committee?

No. There are no operating costs that are large enough to cover the expense of this joint marketing committee by reallocation of resources without completely abandoning current activities that producers have told us in the past they want us to be engaged with. The board has looked at areas to cut which include payments to national associations, lobbying expense, response to government regulations and defending safety net programs, and support for other Ontario associations, and reduced expenses where they could, but the board believes that continued funding for these activities is supported by the broad membership.

If the provincial check-off increase is not passed at this year’s AGM, the board will have no choice but to abandon the joint marketing committee and continue to scale back operational costs.

Q. When would the increase in provincial check-off be implemented if it is approved at the 2019 AGM?

The last time we implemented a provincial check-off increase it took 10 months after approval at the AGM. We anticipate a similar timeframe in 2019.

Q. If the check-off increase is approved at the AGM, but will take 10 months to be implemented, how will the work of the joint marketing committee be funded in 2019?

Initially, OCFA has agreed to fully fund the committee with marketing funding they have been able to secure. This should cover the bulk of expenses in the first year. If additional funds are required in the last quarter, BFO will fund the committee through reserves. The latest we would expect the increase to be implemented would be January 1, 2020.

Q. Should BFO members expect another provincial increase in two years again?

No. The BFO board does not expect to ask for another increase in the foreseeable future.

Q. Will an increase in staffing be required by BFO to support the new committee?

No. BFO will not be increasing staff to support the joint marketing committee. However, some BFO employees may have responsibilities with the committee.

Q. How will this increase, if dedicated largely to marketing, improve BFO’s financial health?

Twenty-five cents of the increase will be dedicated to support BFO’s consumer and producer engagement efforts. If we do our job well through the work of the new joint marketing committee, our industry will expand and we will be able to generate more dollars through increased check-off collection.

Q. How does supporting the development of Ontario beef brands support producers who are not enrolled in an Ontario brand?

A rising tide floats all boats. By growing the market for Ontario-branded beef we should also see the market prices for all Ontario beef improve. An increase in consumer demand for Ontario beef will tighten the flexibility within the Ontario market and reduce the volatility of pricing for all animals, thus decreasing the impact of market volatility for all producers. Through improved market reporting and price transparency, we believe that producers will have the information to show them the benefits of being involved in a value-added Ontario brand.

Q. How are producers whose business structure exempts them from paying check-off contributing to BFO’s marketing efforts?

Check-off is paid by sellers of cattle. Producers who raise their animals from birth-to-finish, then market the beef, are legally exempt from paying check-off under the Beef Cattle Marketing Act but that doesn’t mean they’re not contributing to the greater industry, or strengthening our bond with consumers. We encourage those producers who do fall into the category of being exempt from paying check-off to pay a membership fee to support the association activities.

BFO is in the process of investigating the feasibility of collecting check-off on all finished animals where a change in ownership does not occur. This is a fundamental shift in Regulation 54 of the Beef Cattle Marketing Act and would require consent of the Ontario Cabinet, which means that this will not happen quickly. Based on the analysis of data captured so far, this change would result in a one to two percent increase in cattle numbers where a check-off event would be triggered, but more work needs to be done to better understand the costs and benefits of this proposal.

With regards to access to Collaborative Partnership Program (CPP) funding, dollars are only granted to successful producer applicants who are check-off paying members and who have been vetted through BFO’s membership database. This practice will continue under the new joint marketing committee.

Q. As farmers and business owners, we need to see the market level out. Will the joint marketing committee help create stability in our margins?

Volatility in the marketplace exists not just in Ontario but around the world. We will not completely eliminate it, but by strengthening the consumer’s relationship with Ontario beef products we expect to decrease the impact of market volatility through increased demand for Ontario beef. During any recession, you may have observed that pricing of generic products is driven down. However, higher-end products are less likely to be discounted or are discounted less significantly and thus exhibit more price stability. This is what we’re intending to do with Ontario beef. We want to present to consumers a higher value proposition so that they will continue to support our local products at a stronger price.

There is also a strong correlation between an increase in the price of finished animals and an increase in calf prices. If we can raise the price of finished animals, we will also raise the price of calves.

Q. How does imported beef hurt Ontario farmers?

Unfortunately, only 58% of the beef on our shelves here in the province is Ontario or Canadian beef with the balance of the market filled by imported beef, which is significantly affecting our industry’s competitiveness. Although some of it is premium beef, largely it comes into the province as commodity beef based on low prices. These low prices then set the standard for what processors will pay day-to-day for your animals. Because of our higher cost of production here in Ontario, due to factors beyond our control, we cannot be financially sustainable at the lowest available world price.

This is why, when we talk about our strategy, we refer to the price ladder and say that we need to add more attributes to our product that consumers value. In turn, this will allow us to engage Ontario consumers so they will ask for Ontario beef. This will enable us to climb the price ladder enough that our farms can be sustainable and so that we can build businesses that our children will want and be able to carry on.

Q. As a cow-calf producer, how will this improve the bottom line of my farm business?

If we can lift the price for finished beef animals, we have the historical data to support that there is a very close correlation between a rise in finished prices and a rise in calf prices. More stability in the finished animal price will lead to more stability in the calf price. Our strategy is designed to support the Ontario beef industry across all sectors.